OCR left at 1.75pct
The official cash rate (OCR) has been kept at its record low of 1.75 percent.
Reserve Bank Governor Graeme Wheeler announced on Thursday morning the rate will remain where it has been since November last year.
He also kept the rate track unchanged, saying the recent jump in consumer prices may only be temporary.
The kiwi dollar fell on disappointment he didn't bring forward the track of rate hikes.
"The increase in headline inflation in the March quarter was mainly due to higher tradables inflation, particularly petrol and food prices," Mr Wheeler said.
"These effects are temporary and may lead to some variability in headline inflation over the year ahead. Non-tradables and wage inflation remain moderate but are expected to increase gradually."
In February, the Reserve Bank adopted a neutral stance on policy, signalling the OCR would go nowhere until the middle of 2019.
Government figures showed annual inflation rose to 2.2 percent in the first three months of the year, well above the RBNZ's forecast of 1.5 per cent, and the bank's survey of expectations saw firms raise their view on how quickly consumer prices would rise.
Former Reserve Bank Governor Don Brash isn't surprised the OCR was left unchanged.
Speaking to the AM Show prior to the announcement, Dr Brash said what should be focused on is Mr Wheeler's "tone".
"Last time he made a big announcement he said there'd be no change until 2019, and at that point it could be either up or down.
No one thinks for a moment that the next move might be down unless there's some kind of calamity in the world economy," he says.
He believed there was a possibility the OCR might go up by the year's end, but it depends on what happens with the Budget on May 25.
"The Budget determines how much fiscal stimulus there is to the economy. If it's very strong we could see an increase by the end of the year, but I think that's probably not likely."
He said a widely tipped decision by the US Federal Reserve to raise its rates could have a flow-on effect for New Zealand.
"That'll put downward pressure on our exchange rate. If our rate remains the same that will tend to push up the inflation rate."
Economists were looking to see whether that changing view would spur Mr Wheeler to bring forward the track of interest rate hikes. However, Mr Wheeler said developments since then had been neutral for monetary policy, and that while other central banks were winding back their extraordinary stimulus programmes, monetary policy would stay loose in advanced economies for some time.
The bank kept its forecast track for the OCR to be at 1.8 percent until September 2019 when it rises to 1.9 percent and doesn't fully price in an increase until March 2020 when a 2 percent rate is pencilled in.
The kiwi dropped half a US cent after the release and was recently trading at US68.47 cents from US69.30c immediately before.
NZN / Newshub.